The Canadian Coalition for Good Governance (CCGG) recently
released its much anticipated policy paper on "proxy access", a
term which refers to shareholders' conceptual right to
nominate directors and have those nominees placed on
management's ballot. The CCGG takes the position that this
right, which is supplemental to a shareholders right to elect
directors, "is an essential component of shareholder
democracy". In a previous post, Kaitlind de Jong reported on
the efforts the CCGG has undertaken to promote enhanced proxy
access for shareholders in Canadian public companies prior to
the release of its policy.
Current best practices in Canada suggest that nominees should be
chosen by an independent nominating committee of the board.
Canadian corporate statutes also provide a platform to proxy access
by giving a five percent shareholder of a company the ability to
requisition a special shareholder meeting to elect directors or
submit a shareholder proposal.
The CCGG policy paper lays out certain recommendations for
companies adopt policies that will allow shareholders to
communicate directly with boards on a regular basis regarding board
composition and suggests certain corporate and securities law
amendments which purport to enhance proxy access. One such
amendment would allow shareholders of companies with market
capitalizations of under $1 billion who hold an aggregate of at
least three (3) percent of an issuers outstanding shares with the
ability to nominate directors for election, and such nominees would
be placed on management's form of proxy. This change would bear
a significant impact on Canadian corporate governance since
currently 92.2 percent of all companies listed on the TSX and TSX-V
have a market capitalization below $1 billion. However, the CCGG
has suggested that in circumstances where shareholders are seeking
control of the board, the number of shareholder nominees should be
capped to the lesser of three directors or twenty percent of the
board in an effort to avoid 'creeping board control'. For a
more detailed discussion of the suggested changes please consult
the CCGG's policy paper.
Judging by the experience with proxy access rules in the United
States, even though it is unclear when or if the suggested
amendments will be adopted, the initiative will arguably put
pressure on the regulators and governance of public companies. In
2010, the U.S. Securities and Exchange Commission recommended
similar rules to those proposed by the CCGG which were subsequently
struck down by the U.S. Court of Appeal. Despite the ruling, the
policy gained traction and numerous prominent institutional
investors such as CALPERS have been advocating for the adoption of
enhanced proxy access by-laws. To date, over 30 companies in the
U.S., including General Electric, Citigroup, Bank of America, and
Verizon Communications Inc. have adopted or agreed to adopt
enhanced proxy access by-laws either voluntarily or in response to
The author would like to thank Hugo Margoc, summer student,
for his assistance preparing this legal update.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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